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Global Innovation Hubs: Markets Driving the Future of Business

As talent clusters have emerged throughout the U.S. and the rest of the world, industries that require innovation have followed, forming global innovation hubs. While the Bay Area (unsurprisingly) leads the pack, there are several other innovation hubs catching up, especially as factors that impact the labor force – like the high cost of living and housing affordability crisis – start to push investors and companies to other markets around the world. We interviewed David Hickey, Managing Director, Hickey & Associates, at the 2019 Area Development Consultants Forum in Houston about some of these insights. Below are some excerpts from our interview, which you can also watch here.

Q4 2020
Area Development interviewed David Hickey, Managing Director, Hickey & Associates, at our Houston Consultants Forum. Our discussion covered the factors that go into the making of a global innovation hub. Interview conducted by Margy Sweeney, Founder and CEO, Akrete Inc., and Area Development Editorial Board member.
The Making of a Global Innovation Hub
Well, to be a global innovation hub, there are number of core factors that a market needs to have, first and foremost, a collaborative community and environment. What I mean by that is university partnerships and real support from all different stakeholders across the board. That's government, corporate, academics. Across the board. It also needs to have a population [that constitutes] a talent magnet. You know, in a community that has a millennial population that's growing, or that has a population that is coming to that market, particularly international [populations] as well. It needs to have a funding line. So looking at VC funding, R&D funding as well, but also looking at what is that new funding? Those new dollars that are coming in to support businesses of tomorrow, the startups in early rounds as well. And then with that, where are those communities that have a high number of startups, that have a high number of patents, [patent] applications and [secured] applications as well.

Where Are the Global Innovation Hubs?
Leading the pack is certainly San Francisco, [and the entire] Bay Area. It doesn't surprise anyone. It’s [the] highest in venture capital funding and funding across the board, and it will be. And, in some [parts of the Bay Area], it [ranks] exponentially higher than the next closest market. It has a population that [companies] go to. It has the universities. It certainly has the startups and patent levels.

But we're also seeing some challenges that are coming to San Francisco. In fact, in the 2019 rankings, Boston came in front of San Francisco. And why was that? It’s because of the overall environment and some of the challenges that San Francisco is facing going into the future. Some of that is that investment loss, [even though it’s] still several times higher than others, is challenged and stagnating in some areas. And then also, there's just other challenges [in] affordability of living, some of the housing situations and whether or not companies will continue to invest in the Bay Area, or will they look for other markets?

[Maybe] some of those markets that came very high up in in our global innovation hubs. So, markets like Hartford or Detroit that surprise some in those elements. When you will get Hartford, you're looking at one of the [hubs of] InsureTech, an incredible investment, and incredible collaborative environment that's looking specifically at the insurance industry. And there is an unbelievable amount of investment into the future of insurance.

You have Detroit and throughout Michigan on the automotive space and autonomous vehicles. The future of mobility is being driven by innovation. Again, many may think it's what's happening in Mountain View, but really, it's what it's what's happening in Ann Arbor or Detroit. And some of those elements where you have thousands of individuals, that are focusing and driving this innovation to the integrated supply chain in building up and driving the innovation towards the future of the industry.

Global Hubs Outside the U.S.
Outside the U.S. … and outside the Americas, some of the top raters are Bejing, as an example in China. A lot of their distributing from investment is directly tied to the central government by their technology, automotive, and industrial practices. Singapore is one that's always going to be up near the top or at the top of the list, depending on the rankings in the year. It is a is a very international population. It has just as good as any in collaborative environment and support from the government for innovation. And it has, which is a critical factor in global innovation hubs also, the business friendliness, and the protections of IP that are in place as well. The future of mobility is being driven by innovation. Again, many may think it's what's happening in Mountain View, but really, it's what it's what's happening in Ann Arbor or Detroit.

When we turn to Europe, London is number one. Paris came in number two. Then after that, you have a number of German and Swiss cities and then other British cities as well that came in very strongly. I think we’ll continue to see London, it's a confident place for businesses to continue to invest. I won't take this time to make any guess as to where Brexit has turned, how it's gotten to today and how this will result. But there are still investments that are going to occur throughout the UK because you have the collaborative environments. You have that investment, and you have the people as well.

Site Selection and Global Innovation Hubs.
Well, it is surprising to many what the number one factor is or what those leading factors are. And when you ask what are the core factors? There's always the catchy answer of: it depends. Because it really does on the industry, the company, maybe even the company's culture, the geography looking in, what are those leading factors. But, definitely today, the number one factor across all industries and sectors is workforce. And it's not always about costs. I've said it’s an important factor, and it will always be in a business decision, but it’s about the skills and ensuring that those skills are there today. And they're gonna be there tomorrow and well into the future, because that’s what we call labor sustainability. That workforce is what's gonna drive it. It doesn't matter if you have a more cost-effective workforce if you don't have the people to get the job done. And as we look at innovation hubs, workforce being one of those primary drivers, it’s critical to really being able to capture and invest into that future and having that confidence when looking into it. And that's where corporate decision makers are focusing today.

Availability of real estate is a core factor when it comes to this site decision, but a lot of the way that we approach it, especially when we're looking at innovation and we're looking on a global scale, is to first prove out the markets themselves. Benchmark them apples to apples with the Global Innovation Hubs report. We went from comparing Boston to Baltimore, to Bangor, to Bangkok, all on the same level playing field. And we compare those, because we need to understand, what are those markets that can support an investment? Is it a small AI facility, a startup or stand-up for a large corporate, or is it a large innovation center that could be hundreds of individuals looking at tech, looking at science, looking at biotech into a market? And so first, ensuring that those places can facilitate the investment and where that company's looking to go to.

As we look and start to narrow down those markets is when real estate availability really comes into play. Because there are certainly markets around the world, that are challenged, and can be challenged when it comes to having that space today. Or maybe it's even parking lots and certain CBDs of markets that are driving and becoming innovation hubs. But can a company come in and support, you know, and have that real estate to really get to where they want to be today and tomorrow? But it's interesting because you have in this disruption of the market with real estate such as your WeWork, your Industrious, some of those companies, that are actually helping with innovation hubs because they're providing some of that short-term solution that didn't exist in the past. That if you're coming in and you're looking to hire 100 new individuals that are filling this innovation space, one of those types of providers can help with that short-term solution in order to get to it. And we encourage our partners and stakeholders throughout the process to work to help get ahead of some of those challenges as well, and to identify different sites and facilities that can help and support for when the company does come and they have that opportunity. You know, there might be space or at least space coming online that could fit with their needs and requirements.

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